Australia: Controversial Comcare case draws a line for worker's compensation claims

IN BRIEF

In a decision which has divided legal opinion, the High Court has made a ruling as to what is meant by the expression "in the course of employment". The High Court considered this expression in the case of Comcare v PVYW [2013] HCA 41 in the context of a workers' compensation claim brought by an employee who was injured during sex in a motel room. The High Court by a majority, upheld an appeal by Comcare and determined that no compensation was payable.

THE FACTS

In 2007 a Commonwealth Government employee was required for work purposes, to travel to a country town and spend the night in accommodation chosen and paid for by her employer. During the stay the employee arranged to meet a male friend who lived in the area for a meal. After enjoying dinner together the employee and her friend returned to the motel. Whilst at the motel the couple engaged in sexual intercourse. In the process, a glass fitting was pulled from its mount which struck the employee who suffered facial and psychological injuries.

The employee claimed compensation for her injuries under section 14 of the Safety, Rehabilitation and Compensation Act 1988 (Cth). The section provides that Comcare is liable to pay compensation in respect of an "injury" suffered by an employee, physical or mental, arising out of, or in the course of employment. The claim essentially concerned the second limb of this test (as it was not suggested that the incident arose "out of" the employment).

It was argued by the employee that because she was at a particular place, at the instigation of her employer, her injuries were suffered in the course of employment and compensation was therefore available, absent any misconduct on her part.

The claim for compensation was initially accepted by Comcare, however on further investigation Comcare revoked its earlier decision and denied compensation for the injuries suffered on the basis that the injuries suffered were in the course of a private activity and not in the course of employment.

THE ADMINISTRATIVE APPEALS TRIBUNAL

The Administrative Appeals Tribunal (AAT) affirmed the decision of Comcare on the basis that the employee had failed to demonstrate the relevant connection between her injuries and employment. The AAT held that the activity was not an ordinary incident of an overnight stay such as, showering sleeping or eating. Rather the employee was engaged in a recreational activity which her employer had not induced or encouraged. Accordingly, the injuries suffered took place during the employee's leisure time which were of a private nature, and had not arisen in the course of her employment.

APPEAL TO THE FEDERAL COURT

The primary judge, Nicholas J rejected the finding of the AAT and held that the AAT had erred in holding it was necessary for the employee to show that the activity which led to her injuries had been induced or encouraged by her employer, in order to succeed in her claim.

An adequate connection existed between her employment and her injuries, because the employee's injuries were suffered whilst she was at a particular place, at the encouragement of her employer, during an interval or interlude in an overall period of work (consistent with the principles in Hatzimanolis v ANI Corporation Ltd (1992) 173 CLR 473) (Hatzimanolis). Comcare appealed to the Full Federal Court.

APPEAL TO THE FULL FEDERAL COURT

On appeal, the Full Federal Court considered the application of the High Court authority in Hatzimanolis. The High Court in Hatzimanolis had formulated an organising principle to assist in determining liability with respect to claims made under workers compensation legislation. As noted above the legislation compensated for injury arising "out of or in the course of employment". The test relevantly dealt with where an injury was sustained in an interval in an overall period of work.

The High Court in Hatzimanolis held:

"....an interval or interlude within an overall period or episode or work occurs within the course of employment if, expressly or impliedly, the employer has induced or encouraged the employee to spend that interval or interlude at a particular place or in a particular way. Furthermore, an injury sustained in such an interval will be within the course of employment if it occurred at that place or while the employee was engaged in that activity unless the employee was guilty of gross misconduct taking him or her outside the course of employment".

The Full Federal Court noted that the test in Hatzimanolis provided two alternative ways in which an injury in an interval in an overall period of work would be compensable (unless gross misconduct by the employee was involved):

  • If the employee had been induced or encouraged by their employer to spend the interval at a particular place; or
  • If the employee had been induced or encouraged by their employer to spend the interval in a particular way.

In this case it was adequate to ground the compensation claim that the employee had been at a place her employer had encouraged her to stay when she sustained an injury.

APPEAL TO THE HIGH COURT

The majority judgment of the High Court comprising French CJ, Hayne , Crennan and Kiefel JJ agreed that the principle in Hatzimanoliswas applicable however rejected the full Federal Court's formulation.

The majority held that the principle was not to be applied literally ignoring the terms of the Safety, Rehabilitation and Compensation Act which seeks to limit an employer's liability for compensation. The High Court held that if the application of Hatzimanolis by the lower courts was correct then the decision would need to be reconsidered. It would need to be reconsidered because this particular application would result in an undue extension of employer's liability to pay compensation for any injury suffered by an employee at any place away from their usual place of work. At the end of the day the majority considered that the application of Hatzimanolis by the lower courts was incorrect.

The majority held that in applying what was said in Hatzimanolis, the enquiries to be satisfied, to meet the test were:

  1. Was the employee engaged in the "course of employment" (which requires a factual finding that the employee suffered injury but not engaged in actual work)?
  2. How was the injury bought about? This is the key question. Was it referable to an activity or to being at a place?
  3. Where an activity was engaged in at the time of injury, the relevant question then is whether the employer induced or encouraged that activity?
  4. If the injury occurred at or by reference to a particular place, the relevant question then is whether the employer induced or encouraged the employee to be there?
  5. If the answer to the relevant question is YES then the injury will have occurred "in the course of employment".

The majority stated that where an activity was engaged in at the time of injury, the relevant question is whether the employer induced or encouraged that activity, not whether the employer encouraged the employee to be at a place. An employer's inducement to be at a place was not relevant in such a scenario.

The majority noted that an injury associated with a place may involve something occurring to the premises or some defect in the premises. For example if the light fitting in the motel under consideration, had been insecurely fastened and fell upon the employee, the injury suffered would have arisen by reference to the motel. The employer would be responsible for the injury in those circumstances because the employer had put the employee in a position where injury occurred because of something to do with the place.

The minority judgments of Bell J and Gageler J upheld the Federal and Full Federal Court's position and dismissed the appeal in two very powerful dissenting judgments. They reaffirmed that the test in Hatzimanolis was that there two independent and alternative ways in which an injury in an overall period of work would be compensable (unless gross misconduct by the employee was involved) as observed by the Federal Court and Full Federal Court (see above). They were critical of the arguments advanced by Comcare.

Bell J observed at paragraph 96:

"Comcare disavows that the "circumstances of injury inquiry" is an inquiry respecting a causal relation. However, it does not embrace the Tribunal's analysis of an interruption of the temporal relation. Comcare acknowledges that, at least for some purposes, the respondent was within the course of her employment at the motel notwithstanding that she happened to be having sexual intercourse. The analysis is one which postulates that a person may be in the course of employment for one purpose and not in the course of employment for another purpose. The distinction is between purposes within the ambit of the employer's encouragement to be at the place and those that are not. On this analysis, if the light fitting had fallen of its own motion while the respondent was having sexual intercourse, any resulting injury would be compensable. In such an event, the circumstance of the injury – that it was occasioned by a defect in the premises – would be within the ambit of the employer's encouragement to stay at the motel. It would be an injury arising in the course of the respondent's employment. However, if the circumstances of the injury were occasioned by a lawful pursuit not within the ambit of the employer's encouragement to stay at the motel, it would not be compensable. The respondent would not have been in the course of employment."

Gageler J stated at paragraph 152:

"The central submission of Comcare in the appeal – that an injury that an employee sustains at a place an employer has induced or encouraged the employee to be during an interval or interlude in an overall period or episode of work is not compensable "unless the injury came about through the very use of the 'place' at the 'time' and for the work-related purpose that the employer encouraged or required the employee to be there" – is to be rejected. Not only is a test for compensation stated in those terms inconsistent with the Hatzimanolis principles; it is a return to the outmoded, artificial and intrusive form of analysis that the Hatzimanolis principles were formulated to overcome".

POINTS TO TAKE AWAY

Under the majority of the High Court's decision in Comcare, points which emerge include the following:

  • An employee who is induced or encouraged by their employer to be at a certain place during an interval within an overall period or episode of work and is injured there (and has not engaged in misconduct), is not automatically entitled to succeed in a claim for workers compensation;
  • It is necessary to consider whether the injury results from an activity engaged in by the employee or from the fact of being at the place;
  • Where an activity of the employee was engaged in at the time of injury (which is linked to the injury), liability will be found where the employer induced or encouraged that activity;
  • Sexual intercourse is not an activity that in the normal course an employer could be said to induce or encourage an employee to engage in;
  • Activities engaged in by an employee at the time of injury which an employer may be said to have induced or encouraged, will need to be assessed on a case by case basis. Arguably activities such as having a shower or a meal or sleeping would fit into this category;
  • Where the injury results from the fact of being at a place, liability will be found where the employer induced or encouraged the employee to be at that place.

Employers should take reasonable care in the selection of places they direct their employees to attend, such as motels. If they organise or encourage employees to engage in recreational activities during an interval within an overall period or episode of work, they should take reasonable care to protect against accidents. An employee who is injured in such an activity is likely to be held to have been injured in the course of employment and to have a valid workers compensation claim.

For further information please contact:

Richard Ottley, Partner
Phone: +61 2 9233 5544
Email: rbo@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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